Banks set the pace in Lagos

Cordros Securities has projected a calmer but still constructive second quarter for Nigeria’s equities market, arguing that the sharp gains posted in the first three months of 2026 may give way to more selective buying, with bank stocks likely to remain at the centre of investor attention. That view comes after a powerful first-quarter rally on the Nigerian Exchange, where banking counters were among the strongest performers and recapitalisation momentum continued to reshape sentiment.

The brokerage’s stance suggests the market is entering a phase in which investors may become more discriminating rather than broadly bullish. Cordros said sector rotation is likely to persist in the second quarter, with banks expected to draw interest because of strong earnings and dividend expectations. The call points to a market that still has support from corporate fundamentals, even as the pace of gains may moderate after a blistering start to the year.

That shift in tone follows one of the strongest quarterly runs seen on the bourse in years. Market data reported at the turn of the quarter showed the NGX All-Share Index closed March above the 200,000-point mark for the first time, while total market capitalisation climbed to about N129.2 trillion. Separate market reports also indicated that the banking index rose by roughly 22.8 per cent year to date in the first quarter, reinforcing the view that lenders have been a key engine of the rally.

Bank shares have been supported by more than one theme. Stronger earnings expectations and dividend prospects have helped, but the larger structural driver has been the Central Bank of Nigeria’s recapitalisation push, which has encouraged investors to look again at the sector’s longer-term growth capacity. Bloomberg reported in March that 30 lenders had already met the new capital threshold ahead of deadline, while Nigerian media, citing the central bank, said on April 2 that 33 of 37 banks had met the revised minimum capital requirements and raised N4.65 trillion in fresh equity.

That recapitalisation process has altered how investors are pricing bank stocks. Markets generally favour institutions seen as better placed to absorb tighter regulatory demands, preserve capital adequacy and still deliver returns. Analysts have argued that stronger balance sheets can improve resilience and lift confidence in the sector, even though smaller lenders may face more pressure to merge, restructure or narrow their ambitions. A Reuters report in January on wider securities-industry reforms said the tougher capital rules were designed to improve stability and investor protection, with consolidation seen as a likely side effect across parts of the financial system.

The macro backdrop also helps explain why Cordros is constructive without sounding exuberant. Reuters reported in late March that Nigeria’s capital inflows jumped 90 per cent in 2025 to $23.22 billion, driven mainly by foreign portfolio investment seeking high returns. Equities accounted for $2.10 billion of those inflows, while the banking sector drew the largest share overall. That influx has supported confidence in Nigerian financial assets, but it also underlines a vulnerability: much of the money is short-term and can reverse quickly if global risk appetite weakens or domestic policy credibility comes into question.

This creates the tension now visible in second-quarter forecasts. On one side, investors are looking at still-attractive company results, a more stable reform narrative and evidence that local financial institutions are adapting to a more demanding regulatory environment. On the other, valuations have risen sharply, profit-taking risks are higher and portfolio flows remain sensitive to shifts in global rates, oil prices and currency expectations. Cordros’ choice of words appears to reflect that balance: the market may no longer be in straight-line rally mode, but the broader case for equities has not broken down.

Another feature likely to define the quarter is selectivity beyond the banking complex. The strong first-quarter performance was broad enough to lift sentiment across the board, yet analysts expect leadership to rotate between sectors depending on earnings releases, dividend declarations and policy signals. Consumer names, industrials and other financial plays may still attract tactical flows, but banks are likely to remain the clearest proxy for investors seeking exposure to reform, income and scale. That is particularly true after the recapitalisation process gave the market a more concrete measure of which lenders are positioned to emerge stronger.